Question

Joe​ Henry's machine shop uses 2 comma 490 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the​ brackets: Annual demand 2 comma 490 Holding cost per bracket per year $ 1.35 Order cost per order $ 20.00 Lead time 2 days Working days per year 250 ​a) What is the​ EOQ? nothing units ​(round your response to two decimal​ places).

Answer 1

Complete question:

Joe​ Henry's machine shop uses 2 comma 490 brackets during the course of a year. These brackets are purchased from a supplier 90 miles away. The following information is known about the​ brackets: Annual demand 2 comma 490 Holding cost per bracket per year $ 1.35 Order cost per order $ 20.00 Lead time 2 days Working days per year 250 ​a) What is the​ EOQ? nothing units ​(round your response to two decimal​ places).

a. Given the above information, what would be the economic order quanity (EOQ)?

b. Given the EOQ, what would be the average inventory? What would be the annual inventory holding cost?

c. Given the EOQ, how many orders would be made each year? What would be the annual order cost?

d. Given the EOQ, what is the total annual cost of managing the inventory?

e. What is the time between orders?

f. What is the reorder point (ROP)?

Solution:

Annual demand : 2,490 pieces

Holding cost per bracket per year: $1.35

Order cost per order : $20.00

Lead time : 2 days

Working days per year : 250

a)

Q* =
`\sqrt{ {(2* Order Cost * Demand) / Holding Cost}}`

Q* =
`\sqrt{ {(2* 2,490* 20.00 ) / 1.35 }}` = 270

b) Average inventory = 270/2 = 135

c) 10 orders per year

d)

Total annual inventory cost =
`\sqrt{{(2* annual demand * Order cost per order * holding cost)}}`

=
`\sqrt{ {(2*2,490 *20.00 *1.35 )} }` = 367

e) 25 days

f) What is the reorder point (ROP)?

ROP = dL

= Daily demand * Lead Time

= (2,490 /250)(2) = 20